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The Federal Trade Commission’s record-breaking settlement with Facebook, announced moments ago, will slap the company with a $5 billion fine and grant regulators exceptional oversight of the company’s business practices. But even within the government watchdog, some commissioners fear the agreement didn’t go far enough.
My colleague Tony Romm writes this morning that the settlement -- which includes the largest fine for a privacy violation in U.S. history -- comes as the FTC alleges the social media giant misled its users about the ways app developers and advertisers could obtain their personal data. Facebook’s leaders, including chief executive Mark Zuckerberg, must now submit to unprecedented scrutiny by federal regulators. And the company must submit its new products and services to privacy reviews before they are implemented.
“The magnitude of the $5 billion penalty and sweeping conduct relief are unprecedented in the history of the FTC,” FTC Chairman Joe Simons said in a press release. “The relief is designed not only to punish future violations but, more importantly, to change Facebook’s entire privacy culture to decrease the likelihood of continued violations.” The investigation opened nine days after the Cambridge Analytica scandal, but it quickly broadened into the company's other privacy mishaps, including Facebook's previously secret data-sharing relationships with select hardware makers and apps.
While the settlement winds down the agency’s sweeping sixteen-month probe, it’s likely to trigger greater examination of whether the country’s top privacy cop is able to hold tech giants accountable. Facebook didn’t have to admit guilt for its transgressions as part of the settlement, and Democrats within the agency have serious concerns about whether the settlement will actually make Facebook change its ways.
The agency’s two Democratic members, Rohit Chopra and Rebecca Kelly Slaughter, voted against the order and issued a warning that the fine was too small and the remedies should have gone farther. Democratic lawmakers in Congress have already blasted the agency following reports of the $5 billion fine, which was less than 10 percent of the company’s revenue last year.
“Facebook’s repeated abuses of user privacy while under order by the FTC undermined the public’s confidence in our agency and in law enforcement generally,” Chopra wrote in his dissenting opinion. “I do not believe a $5 billion penalty, especially as part of a settlement that otherwise blesses the company’s business model, will restore the public’s confidence or vindicate our authority.”
The company's top lawyer Colin Stretch wrote in a Facebook post this morning that the agreement will require the social network to make a "fundamental shift" in its work and place new responsibilities on its employees. "It will mark a sharper turn toward privacy, on a different scale than anything we’ve done in the past," he wrote.
Here's what you need to know about the FTC settlement's new requirements for Facebook:
Facebook must create a new independent committee within its board of directors to oversee its privacy decisions -- a move the FTC says is intended to limit Zuckerberg’s unilateral power.
The company must appoint compliance officers who will oversee the company’s privacy practices. These officers, along with Zuckerberg, must independently certify to the FTC that Facebook is complying with the settlement. Any false certification could result in fines.
For the next 20 years, a third-party organization will review Facebook’s data-collection practices -- including its other services, Instagram and WhatsApp.
Facebook must conduct a privacy review of every new or modified product, service, or practice, and document any decisions about how those efforts impact privacy.
When the data of 500 or more users is compromised, Facebook needs to notify the FTC and the third-party organization within 30 days of the incident.
Facebook has to do more to police third-party apps, including banning app developers that do not certify they are complying with Facebook’s policies.
When Facebook collects a phone number for security reasons like two-factor authentication, it can’t use that number for advertising.
Facebook needs to notify users when it’s applying facial recognition technology -- and get affirmative consent when it’s using it in ways that expand beyond what it's previously told consumers.
The company must encrypt passwords and regularly check if any passwords are stored in plaintext.
When people sign up, Facebook can’t ask for email passwords to other services.
And here's what you need to know about the dissenting opinions from Democrats on the FTC:
The FTC could have fined much more than $5 billion, the commissioners say. Chopra argues that this amount, while headline-grabbing, might be less than the financial gains Facebook made by violating its previous privacy agreement with the agency because it bolstered the company’s digital advertising dominance.
Chopra and Slaughter are concerned the FTC gave legal immunity to Zuckerberg and other company executives for other privacy issues that may have happened before the agreement.
The commissioners think the agency could have done more to target Zuckerberg, as Tony reported they previously considered. Slaughter argued that there was sufficient evidence for the FTC to name Zuckerberg in a lawsuit, and Chopra criticized the agency for not deposing him.
The order didn’t do enough to limit how Facebook collects, uses or shares data, the commissioners said. “Instead, the order allows Facebook to decide for itself how much information it can harvest from users and what it can do with that information, as long as it creates a paper trail,” Chopra wrote.
BITS: The Department of Justice is launching a wide-reaching review of anti-competition concerns in the tech industry, the agency announced. The probe “threatens the whole of Silicon Valley at a moment when Democrats and Republicans alike increasingly are sounding the alarm that tech companies have become too large and powerful, threatening rivals and harming consumers,” my colleagues Tony Romm, Elizabeth Dwoskin and Craig Timberg write.
The Justice Department will explore “widespread concerns that consumers, businesses, and entrepreneurs have expressed about search, social media, and some retail services online,” according to a press statement. The announcement follows a hearing last week in which Google, Amazon, Apple and Facebook all went in front of a House antitrust committee to deny they engaged in anti-competitive practices.
NetChoice, a tech lobbying group that counts Facebook and Google as members, quickly slammed the move, urging the DOJ to “resist the siren song of populism.”
Senators from both sides of the aisle also expressed their approval. From Sen. Richard Blumenthal (D-N.Y.):
Antitrust enforcers must now be bold & fearless in stopping Big Tech’s misuse of its monopolistic power. Too long absent & apathetic, enforcers now must prevent privacy abuse, anticompetitive tactics, innovation roadblocks, & other hallmarks of excessive market power. https://t.co/U8b9tqp93a— Richard Blumenthal (@SenBlumenthal) July 23, 2019
And Sen. Josh Hawley (R-Mo.):
NIBBLES: Apple’s App Store routinely skirts its own rankings rules by putting Apple-owned apps at the top of search results, Tripp Mickle at the Wall Street Journal reports. Apple’s strategy of boosting its own app products coincides with increased scrutiny over the company’s potentially anti-competitive practices by U.S. and European regulators.
The Journal found that Apple’s apps ranked first in more than 60 percent of basic keyword searches. The likelihood that an Apple App showed up first skyrocketed to 95 percent for subscription and sales-based products, like Apple Music. In some cases, popular apps like Audiobooks.com found themselves dethroned from the No. 1 spot overnight when Apple launched a competing product, the Journal found.
Apple disputed the Journal’s claims and stated that search results can vary based on machine learning tailored to user preferences and fluctuations in app rankings.
While federal regulators weigh potential antitrust action, companies are fighting back against Apple in Europe and in court. Spotify filed an antitrust complaint against Apple in Europe in March claiming the company discriminates against rival subscription services in its App Store. Apple also faces a lawsuit in U.S. federal court over charges that the App Store, which accounts for 65 percent of app downloads and charges developers up to 30 percent of their revenue, constitutes a monopoly.
BYTES: A growing group of “never-Googlers” are spurning the company’s ubiquitous online reach, my colleague Greg Bensinger reports. Exchanging convenience for privacy, abstainers are driving miles to avoid online ordering from sites that have ad-tracking software and “setting up permanent vacation responders on Gmail,” Greg writes.
“Such never-Googlers are pushing friends and family to give up the search and advertising titan, while others are taking to social media to get word out,” Greg writes. “Online guides have sprouted up to help consumers untangle themselves from Google.”
But it’s not just Google users who are sitting out tech’s overreach. Many Facebook users are deleting their accounts, and nearly one-sixth of American shoppers abstain from Amazon. Brands and politicians are capitalizing on the fever, too — privacy-oriented search engine DuckDuckGo has seen searches double in the past year (though the number is still only a fraction of Google's.)
Google has implemented changes to make its privacy policies easier to understand in the past year, but that hasn’t deterred scrutiny from regulators in the U.S. and abroad.
— News from the private sector:
— News from the public sector:
— Tech news generating buzz around the Web:
- The House Appropriations Committee will host a hearing on the budget and oversight of the White House Office of Science and Technology Policy at 10:15 a.m.
- The Senate Commerce, Science and Transportation Committee will host a confirmation hearing for Michael Kratsios' nomination for U.S. Chief Technology Officer at 10:30 a.m. today.
- Former special counsel Robert S. Mueller III will go in front of the House Intelligence Committee to testify about the investigation into Russian interference in the 2016 presidential election at 12 p.m.
- The House Appropriations Committee will host a hearing on U.S. Customs and Border Protection and Border Patrol oversight at 2 p.m.
- The House Financial Services Committee will host a hearing examining the use of alternative data in credit scoring to expand access to credit on Thursday at 10 a.m.